Over two thirds of Canadians are planning on waiting until mortgage rates drop to purchase a home: BMO Survey

BMO’s Real Financial Progress Index reveals that while homeownership is considered an important financial milestone for many Canadians, concerns about interest rates, inflation and a possible economic recession have affected their approaches to homebuying.

The survey found that over two thirds (68 per cent) of Canadians are planning on waiting until mortgage rates drop to purchase a home. The majority (68 per cent) of Canadians feel buying a home is more out of reach compared to their parents. Gen Z (ages 18 to 24) (71 per cent) are the most likely to have this outlook, followed by younger Millennials (ages 25 to 34) at 69 per cent and older Millennials (ages 35 to 44) at 65 per cent.

According to BMO Economics, Canadian housing activity has rebounded from the slow start in 2023, with home prices firming and existing home sales increasing by 11.3 per cent in April – the largest monthly rise since 2009. However even after last year’s price correction, the combination of past price gains and higher mortgage rates leaves housing affordability near the most challenging level in more than 30 years. The survey found Canadians’ perceptions of the economy have affected their homebuying plans:

• The Waiting Game: Over two thirds (68 per cent) of Canadians are planning on waiting until mortgage rates drop to purchase a home. Among the quarter (26 per cent) of Canadians that have said current mortgage rates have affected their decision to move homes, 18 per cent are holding off as a result of market uncertainty and volatility.
• Deferred Decisions: Half (51 per cent) are deferring their home purchases because of their concerns about the economy and 18 per cent plan on waiting until 2024 or later. 20 per cent of Canadians are no longer sure if or when they will buy a home.
• Revisiting Refinancing: 69 per cent are planning on waiting to refinance their home until mortgage rates drop.
• Financial Anxiety: Housing costs (71 per cent) are among the top three sources of financial anxiety for Canadians, after fears of unknown expenses (83 per cent) and concerns about their overall financial situation (81 per cent).

“Homeownership continues to symbolize real financial progress, success and security for many Canadians and their families. While the challenging market and economic conditions may pose hurdles and uncertainty, we encourage Canadians to work with a professional advisor or planner to explore the many paths to homeownership and develop a personalized financial plan to help them get into the home they want within a realistic timeline.”

– Gayle Ramsay
Head, Everyday Banking, Segment & Customer Growth, BMO

Paths to Homeownership

The survey also explored the different financing strategies Canadians intend on using for their home purchase:

• Personal Savings: Half (52 per cent) of Canadians plan on using personal savings to pay for their home purchase.
• Help with Loans: 41 per cent of Canadians plan on using loans from their financial institution and/or lines of credit to help finance their home purchase.
• Family Support: A fifth (19 per cent) of Canadians are expecting help including financial gifts and loans from family, friends and/or others.
• Home Buyer Programs: Among the 46 per cent planning on using Canada’s assistance programs, nearly a third (32 per cent) plan on using the First-Time Home Buyers Incentive and 16 per cent plan on using the Home Buyers’ Plan (HBP).

“Amid this challenging and changing market, homebuyers are keeping a keen eye on interest rates. Regardless of when buyers are planning their purchase, it’s essential they have a clear understanding of budget and affordability at the start of their homebuying journey.” 

– Hassan Pirnia
Head, Personal Lending and Home Financing Products, BMO